Debt Relief is down: Other ODA rises slightly

04/04/2008 - The 22 member countries of the OECD Development Assistance Committee, the world’s major donors, provided USD 103.7 billion in aid in 2007.

The 2007 outturn reflects:

the end of exceptionally high levels of debt relief (notably for Iraq and Nigeria)

a small increase in other official development assistance.

Overall, most donors are not on track to meet their stated commitments to scale up aid and will need to make unprecedented increases to meet the targets they have set for 2010.

Total ODA in 2007

With the end of exceptionally high debt relief, total official development assistance (ODA) from members of the Development Assistance Committee (DAC) fell by 8.4% in real terms in 2007 to USD 103.7 billion, according to provisional data reported by members. This represents a drop from 0.31% of members’ combined gross national income in 2006 to 0.28% in 2007 (see Table 1 and Chart 1).

The fall was expected. ODA had been exceptionally high in 2005 (USD 107.1 billion) and 2006 (USD 104.4 billion), due to large Paris Club debt relief operations for Iraq and Nigeria. Debt relief grants diminished in 2007 to USD 8.7 billion as the Paris Club operations tapered off (see Table 2).

Excluding debt relief grants, DAC members’ net ODA rose by 2.4%.

Bilateral aid to sub-Saharan Africa, excluding debt relief, increased by 10% in real terms. This represents an improvement on the recent rate of increase. But it is clear that donors still face a real challenge to meet the Gleneagles G-8 summit projection to double aid to Africa by 2010.

Donor performance

The largest donors in 2007, by volume, were the United States, followed by Germany, France, the United Kingdom and Japan. The only countries to exceed the United Nations target of 0.7% of GNI were Denmark, Luxembourg, the Netherlands, Norway and Sweden.

In 2007, net ODA by the United States was USD 21.8 billion, representing a fall of 9.9 % in real terms. Its ODA/GNI ratio fell to 0.16%. This fall was mostly due to debt relief, which was high in 2006, and a reduction in ODA to Iraq. Excluding debt relief, there was an increase in ODA to sub-Saharan Africa (+4.4% in real terms to USD 4.5 billion) and the Least Developed Countries (+4.0% to USD 4.8 billion). ODA to Afghanistan increased (+11.7% to USD 1.6 billion) and remained important to Iraq (-25.5% to USD 3.7 billion). The United States’ ODA to fight HIV/AIDS increased by 26.1% to USD 3.4 billion.

Japan’s net ODA was USD 7.7 billion, representing 0.17% of GNI. The 30.1% fall in real terms was in part due to a decrease in debt relief operations, which were exceptionally high in 2005 and 2006, and to a decrease in contributions to international financial institutions. Japan’s ODA has been on a downward trend since 2000, except for an increase in 2005 and 2006 due to debt relief.

The combined ODA of the fifteen members of the DAC that are EU members – which represents 60% of all DAC ODA - fell by 5.8% in real terms to USD 62.1 billion, representing 0.40% of their combined GNI. The fall was mainly due to a decrease in debt relief grants. Excluding these, net ODA from DAC EU members rose by 8.8%.

Aid rose in real terms in nine DAC EU countries as follows:

Germany (+5.9%), reflecting an increase in bilateral aid and contributions to international organisations;

Net ODA by the European Commission rose by 3% to USD 11.8 billion mainly due to increased programme and project aid. Humanitarian aid also increased, and the EC’s disbursement capacity continued to improve.

ODA from other DAC countries rose or fell from 2006 to 2007 as follows:

Canada (-2.7%), due to a fall in contributions to multilateral organisations as well as reduced debt relief;

New Zealand (+3.7%);

Norway (+13.4%), in large part due to increased equity investment;

Switzerland (-3.0%), due to a lower volume of debt relief.

The following non-DAC economies also reported changes in net ODA as follows:

Chinese Taipei (-7.6%);

Czech Republic (-3.6%);

Hungary (-49.9%);

Iceland (-6.5%);

Korea (+42.8%), as contributions to international organisations rose;

Latvia (+23.4%);

Lithuania (+74.8%), due to increased assistance to Afghanistan and contributions to the EC;

Poland (+3.2%);

Slovak Republic (+0.6%).

On a gross basis (i.e. without deducting loan repayments), ODA was USD 116.5 billion, with the United States (USD 22.6 billion), Germany (USD 13.8 billion), Japan (USD 13.6 billion), the United Kingdom (USD 11.8 billion) and France (USD 11.6 billion) accounting for 63% of the total (see Table 3).

Future ODA prospects

At the Gleneagles G8 and UN Millennium +5 summits in 2005, donors committed to increase their aid. The pledges made at these summits, combined with other commitments, implied lifting aid from USD 80 billion in 2004 to USD 130 billion in 2010 (at constant 2004 prices). While a few countries have slightly reduced their targets since 2005, the majority of these commitments remain in force. Chart 2 shows the history of ODA levels since 1990 and the steep increase still required for donors’ current, somewhat reduced, commitments to be met. Chart 3 gives a simplified view of progress since 2004, compared with the original 2005 targets for ODA in 2010. This chart shows that ODA has only risen at half the rate required to meet the original targets.

Overall, most donors are not on track to meet their stated commitments to scale up aid; they will need to make unprecedented increases to meet their 2010 targets. The OECD has completed the first comprehensive survey of donors’ future spending plans to 2010 and the results will be published early in May. While the findings are still to be finalised, the preliminary conclusions that emerge are that donors have programmed around an additional USD 11 billion so far into their planned annual spending by 2010, on top of the extra USD 5 billion for country programmes that they delivered in 2005. This shows that efforts to increase aid are being factored into some donors’ forward plans, but it still leaves about USD 34 billion in 2004 dollars – about USD 38 billion in 2007 dollars – to be programmed into donor budgets if the commitments made in 2005 to substantially increase aid by 2010 are to be fully met.